Shenwan Hongyuan Group Co., Ltd. has released a research report indicating that the combined effects of the Russia-Ukraine war and escalating Middle East tensions are causing significant disruptions to the global air cargo network. These disruptions manifest as flight diversions due to airspace closures, reduced daily aircraft utilization, and decreased effective capacity. With demand for timely air cargo delivery remaining stable, the resulting supply-demand imbalance is expected to drive a phase of rising air freight rates. Chinese cargo airlines, leveraging their inherent advantages, are positioned to be the primary beneficiaries of this market imbalance. Attention is focused on domestic air cargo carriers.

Shenwan Hongyuan's key views are as follows:

**Event Overview** Following the outbreak of the Russia-Ukraine war in 2022, Russia closed its airspace to European and American airlines, severing a core corridor for Europe-Asia routes. On February 28, 2026, military strikes by Israel and the US against Iran led to a rapid escalation of Middle East tensions. Subsequently, Iran, Iraq, Israel, and other countries implemented military control of their airspace, causing significant disruptions to major routes over the Persian Gulf and Middle East. The combination of the Russia-Ukraine conflict and Middle East situation has simultaneously deprived Europe-Asia routes of two major core airspace corridors, forcing a global reconfiguration of the air cargo network.

**Impact of Airspace Closures on Capacity** Post Russia-Ukraine war: European airlines lost access to Russian airspace, requiring Europe-Asia flights to detour via Central Asia or the Middle East. This increased average flight times from Europe to China by 1-4 hours and raised fuel consumption costs. Post Middle East escalation: The CEO of Kuehne+Nagel stated that due to the Middle East escalation, closures or flight cancellations at key hubs like Dubai have removed approximately 18% to 20% of global air cargo capacity from the market. This capacity includes both passenger aircraft bellyhold space and charter flights. Significant backlogs of goods destined for European and American markets are expected to accumulate at Asian airports in the coming days.

Gulf carriers hold a crucial position in global air cargo. Qatar Airways Cargo, Emirates SkyCargo, and Etihad Cargo collectively account for roughly 13% of global air cargo capacity. Their grounding directly led to tight capacity across the global network, with only limited recovery thus far. According to Aevean estimates, using pre-Chinese New Year capacity levels as a baseline, Available Cargo Tonne Kilometers (ACTK) capacity on Asia Pacific-Middle East and South Asia-Europe routes has declined by 39% since the Gulf airspace closures. While airlines have increased direct Asia-Europe freight capacity by approximately 13%-14% by bypassing Gulf hubs and operating longer direct routes, a significant available capacity gap remains.

Air cargo primarily transports high-value, time-sensitive goods, leading to relatively inelastic demand. Key cargo categories include semiconductors and electronics, pharmaceuticals, automotive parts, e-commerce goods, and perishables. IATA data shows that while air cargo accounts for less than 1% of global trade volume, it represents about 30-35% of global trade value. If global trade demand remains stable, air cargo demand is unlikely to decline substantially.

Third-party data indicates that weekly freight rates on several major routes have increased: China-North America rates are up 2%, China-Northern Europe rates are up 7%, and Northern Europe-North America rates are up 3%. While current increases are moderate, capacity loss and ongoing route adjustments are expected to lead to further price volatility.

**Competitive Advantages for Chinese Cargo Airlines** Should Middle East tensions persist, Chinese cargo airlines possess three key competitive advantages: 1) Route Advantage: Chinese airlines can overfly Russian airspace, resulting in lower costs compared to European and American carriers that must take longer detours. 2) Demand Advantage: As the world's largest cross-border e-commerce exporter, China's continuously growing e-commerce demand provides a stable and sustained source of air cargo demand for its carriers. 3) Capacity Advantage: If European airlines withdraw from some Europe-Asia routes due to cost pressures, Chinese airlines can fill this market gap, increasing their share of the global air cargo market.

**Risk Warning:** Macroeconomic conditions; demand growth falling short of expectations; uncertainties in international trade policy; aviation safety.